US:Ford shares bounce
Ford shares bounce
DETROIT -- Shares of Ford Motor Co. posted their biggest gain in two months today after Goldman Sachs removed its "sell" rating from the struggling automaker, saying the potential payoff from its restructuring would outweigh its weak outlook.
Ford shares were up 4.8 percent to $8.28 in afternoon trade on the New York Stock Exchange, the biggest one-day percentage gain since late August when the stock was rallying on expectations of a more aggressive turnaround plan by the automaker.
"We think the focus will remain weighted to restructuring upside," Robert Barry of Goldman Sachs said in a note to clients, after he upgraded Ford shares today to "neutral" from "sell."
"Nearer-term fundamental weakness will likely be discounted in favor of potential for future improvements," Barry said.
Ford's revised Way Forward restructuring announced in mid-September disappointed Wall Street and touched off a sharp sell-off in its shares by steering clear of asset sales and failing to address the company's liquidity position.
But newly appointed CEO Alan Mulally, who spoke to analysts after Monday's announcement of a $5.8 billion quarterly loss, did not rule out a future sale of luxury brands such as Jaguar.
Investor reaction to the quarterly loss was muted. Ford shares closed down just over 1 percent on Monday. Credit default swaps on Ford also tightened on the results, as the debt market reacted to Ford's plan to shore up its cash position with new secured borrowing.
A key factor in the more cautiously optimistic outlook is Mulally, a former Boeing Co. executive credited with turning around the aircraft maker's commercial plane division.
Mulally was named CEO on Sept. 5, ending Ford family scion Bill Ford's troubled five-year stint at the top.
Peter Jacobs, analyst with Ragen MacKenzie, said Mulally appeared committed to improving the company's cost structure and profitability.
"We remain comfortable with the company's turnaround prospects and believe the convertible preferred securities offer an attractive way to participate in the expected...recovery over the next couple of years," Jacobs said in a note.
Jacobs' 24-month target on the convertible preferred securities -- exchangeable for common stock at a later date -- is $48 per share, which equates to about $12 to $13 per common share, he said.
WORSE BEFORE GETTING BETTER?
Rival General Motors, which is undergoing its own sweeping restructuring, has seen its star rise on Wall Street this year as optimism on its own turnaround mounted.
GM shares, which fell by 50 percent in 2005 and hit a multiyear low of $18.40 in late December, bounced back to post a gain of about 80 percent year to date.
But Burnham Securities analyst Dave Healy, who does not see an upside in Ford shares any time soon, said GM was ahead of Ford, particularly on the product front.
Healy, who three months ago bought GM shares but owns no Ford stock, said Ford was at least four years behind GM in its restructuring.
"The key difference between the two companies' turnaround is that Ford, as far as product is concerned. is starting now," Healy said.
Seven of 15 analysts have a "sell" or "underperform" rating on Ford while nine have a "hold" on the shares, according to Reuters Estimates.
Ford plans to close 16 plants, slash nearly 45,000 jobs and is offering buyouts to about 75,000 of its union workers as part of its restructuring.
The company does not expect its North American unit to be profitable until 2009. Ford also cautioned on Monday that operating results would weaken in the current quarter and cash flow would remain negative in the coming few years.
"We believe Ford remains on track to to burn through $7 billion to $8 billion in cash in 2006," said Calyon Securities analyst Joseph Amaturo, who has a "sell" rating and a $5 target on Ford stock. "We continue to believe Ford is financially the weakest of the Big Three."
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....